Balance Transferring an Investment Property onto a Credit Card??!

jlien on 17/03/2023 - 15:25
Last edited 17/03/2023 - 15:27

Ok, so the title sounds crazy.

Here's the situation.

I have a commercial IP with 4 years left on the loan and about 90k outstanding, currently at 6.49%. Monthly repayments are currently $2300
With such a low outstanding balance & term there's not a lot of negotiating room to discuss with the bank.

I do however, note that there are some long balance transfer offers available in the market today.

A couple examples are:

  • Bankwest zero platinum, which is 34 month @ 0% and a once off 2% fee
  • Kogan money black cc which is 30 months @ 0% and a once off 1% fee

If for instance I take the up the bankwest offer, and balance transfer the balance of the loan onto a credit card; even with the 2% upfront fee; i'd have the balance paid off within those 34 months with a $2700 monthly repayment.

The immediate downside is that my monthly repayment would be $400 higher than i'm paying now, plus the $1800 upfront to make it happen.
The upshot is I'll have my IP paid off in 34 months vs the current 47; and i'll also save about $11k in interest (assuming no further changes to interest rates)

Does this still sound crazy? Has anyone else done anything similar to this?
My question would be how I'd get 90k out of a credit card (assuming I even get a high enough credit limit)
In the past, citibank would just send you a cheque or BT directly into a bank account; but neither of these products are from citi.

Are there any other problems that I may be missing out on? Would this completely ruin my ability to get any other sort of loan in the next 34 months?

Financial Credit Card

Comments

  • freefall101 on 17/03/2023 - 15:40
    +6

    You're not going to get a $95k/115k (Bankwest allows 95% BT, Kogan only 80%) credit limit unless you're earning the kind of money that makes a $90k loan a nothing burger. They'll look at your ability to pay 3% of the balance a month and will take into account your existing loans. So you need $2500-3k spare cashflow a month already to get a credit card that big.

    Bankwest t&cs include "Only Australian issued non-Bankwest credit/store cards can be balanced transferred" and while Kogan allows loans it probably wouldn't include a corporate one.

    Maybe try personal credit with favourable terms rather than a credit card? Citibank has 4% and you just get to take the cash. They do up to $75k too. https://www1.citibank.com.au/personal-loans/ready-credit

    • jlien on 17/03/2023 - 15:47

      Thanks for the response.

      Yes that would be a concern too; I've had as high as a 60k limit (but spread across 3 cards). 95k on a single card is a different league altogether.

      The citi ready credit is an interesting option because it's easy. They regularly contact me and try to sell me that product. The downside is that 4% is not 0% like on bw/kogan options, but it's still better than 6.49%

      • freefall101 on 17/03/2023 - 16:38
        +1

        Rough excel calculations but if you pay $2,700 a month for 36 months at 4% you'll pay off the loan and only incur $5600ish of interest. Add that you save $1600 at loan creation time ($199 for citi vs 2% BT fee) you're $4k better off going 4% to 0%. But going from 6.95% to 4% you're about $4,500 better off, Both would be better, but it's still good.

        Of course, you can't get $90k through citi and there's other considerations like the pain in the arse to deal with, the impact on borrowing, costs to close out the other loan early and such.

        It's also a shame it looks like interest rate rises might taper off, I'm tempted to borrow a pile of money from Citi and stick it in an ING account now. Make $750 per year on that 1% differential!

        • jlien on 17/03/2023 - 16:47

          Hehe. Free money is always good.

          I used to have a 34k limit on my Citi and 24k limit on my Westpac, plus a 12k balance in an ANZ exactly to take advantage of 0% BT offers arbing in an offset account when interest was high pre-covid

          But many of those faucets have closed of unfortunately

          • freefall101 on 17/03/2023 - 21:52

            @jlien: Laws changed in 2019, you have to show you have funds to pay off all credit card debt within 3 years (to stop banks giving out credit cards that basically tie people into a lifetime of repayments). Prior to that they handed out credit card debt like candy, which was great for those of us who could manage it sensibly.

  • bigbadaboom on 17/03/2023 - 15:42
    +2

    Unsure how you will move your loan into a credit card - unless you get one with a high limit (or unlimited limit like an Amex charge card), pay the loan off with it, and then transfer that balance into a new credit card with a good offer (like the Bankwest one you mentioned).

    But to address your last question about getting other loans in the future - yes, that will be affected. Having any credit card (whether you use it or not) will take out about $7 from your borrowing capacity for every $1 of credit limit you have on that card. Roughly.

    • jlien on 17/03/2023 - 15:52

      Thanks for the comment about borrowing capacity; that is definitely something to consider.

  • nomoneynoproblems on 17/03/2023 - 15:57

    Damn good job on the commercial IP. How did you go during Covid?

    • jlien on 17/03/2023 - 16:01

      My tenant suffered, and I had to work with them to get them through it. Unfortunately for me that meant quite a few months of half or no rental.

      • nomoneynoproblems on 17/03/2023 - 16:14

        Tough time for sure, but you looks like you’ve made it out of the other side.

        • jlien on 17/03/2023 - 18:09

          I did. But it caused long term damage unfortunately.

          The lease term on my property is 5 years and it last came up for renewal July 2020.

          Circumstances at the time gave me no opportunity to renegotiate a higher rental for the renewal (there was a moratorium on rent increases) so a new 5 year lease was penciled in at lower than I had hoped.

          If the lease came up say, July 2019 then I’d have attempted to lock in a 15-20% base increase for the renewal.

          Seeing as my lease indexes each year at an agreed rate, that miss in 2020 will compound for life (or at least until they move out)

          The lease comes up again in 2025 but the damage has been done and I would struggle to recoup that miss.

  • MS Paint on 17/03/2023 - 16:02
    -1

    I don't think this will be possible.

    Hopefully I'm proven wrong. Watching with interest (pardon the pun).

  • 33725 on 17/03/2023 - 16:16

    If you pay off your loan quickly, wouldn't that mean you will be paying more tax on the income?

    • jlien on 17/03/2023 - 16:26

      Well yes, but the interest savings outweigh the increased tax burden.

  • Mechz on 17/03/2023 - 16:31

    Why not just pay the extra 400 every month and clear the loan quicker?

    • jlien on 17/03/2023 - 16:38

      I could do that too. But with 47 months left I’d only save a handful of months and a few hundred dollars overall, in contrast to knocking off over a year and saving 11k.

      That’s said I am already making additional repayments

  • Donaldhump on 17/03/2023 - 17:41

    unless you earn 500k, I doubt anyone would give you an unsecured loan of 90k for 2%

    • jlien on 17/03/2023 - 18:35

      Probably true unfortunately. I’ll still attempt to find out the absolute max they’d go

  • Gills on 17/03/2023 - 18:17

    Not sure if it’s been said earlier but I am pretty certain that you can’t pay a debt with another debt.

    • jlien on 17/03/2023 - 18:30

      Balance transfers are literally paying off a debt with another debt.

    • blitz on 18/03/2023 - 10:44

      you can’t pay a debt with another debt.

      A walk in the park. Even better, you could pay the debt with another debt, then insure the debt, then sell options in the insurance policy, and CDOs on the repayments. If OP does this right, we could all make out like bandits, sitting on a beach, earning twenty percent.

  • coolsteps on 30/04/2023 - 01:44

    if you have serval credit cards with BT offers for existing customers you may reach that 90 k target but the period of the BT is usually maximum 32 months. just over pay existing card and transfer the credit balance out into a savings account to pay of the loan. but the problem is to find one that doesn't charge fees for cash advances if balance is in credit. ANZ NAB did not charge fees in the past but not sure now? if you overpay amex they may ask for proof of funds came from you and then refund you or close your account. just take up offers like the WBC 1 % BT fee or the No Fee Balance Transfer & 0% p.a. Interest for 32 Months for Existing Credit Card Customers @ NAB

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